The ability of traders to compare the value provided by the array of US market venues is “limited at best”, according to a new report from research firm Aite Group.
The paper, entitled ‘Strategic Considerations for Equity Market Centres’, examines the US market structure and the factors influencing trading strategy, such as regulation and technology. It also looks at how trading strategy considerations impact order routing and how industry structure can limit the effectiveness of some commonly employed business strategies and tactics.
Reflecting on the evolution of the US market – from a manual, centralised and non-transparent market to a highly automated but fragmented assortment of venues – the report concludes that subjectivity, imprecision and interpretive differences can render the market as an unclear mix of “indistinguishable” offerings for the buy-side.
“The combination of market structure, order-routing decisions and industry-specific factors, taken together, have a profound impact on a market centre’s US business operations and ability to succeed,” said Matt Samelson, senior analyst with Aite Group and author of the report, in a statement. “Successful business strategy is predicated upon a clear understanding of these elements, which may reveal more beneficial but less obvious strategic alternatives in favour of certain generally accepted practices.”